Georgia on my mind

FORGET eBay. If you want to buy a dysfunctional boiler house, an international airport, a tea plantation, an oil terminal, a proctology clinic, a vineyard, a telephone company, a film studio, a lost-property office or a beekeepers’ regulatory board, then call Kakha Bendukidze, Georgia’s new economy minister. His privatisation drive has made him a keen seller of all the above. And for the right price he will throw in the Tbilisi State Concert Hall and the Georgian National Mint as well.

If only he could get his hands on the BBC!

Next yearï¿½if not soonerï¿½he will cut the rate of income tax from 20% to 12%, payroll taxes from 33% to 20%, value-added tax from 20% to 18%, and abolish 12 kinds of tax altogether. He wants to let leading foreign banks and insurers open branches freely. He wants to abolish laws on legal tender, so that investors can use whatever currency they want. He hates foreign aidï¿½it “destroys your ability to do things for yourself,” he saysï¿½though he concedes that political realities will oblige him to accept it for at least the next three years or so.

I hear that HMG has kindly offered to take in any unwanted taxes and resettle them here in the UK.

As to where investors should put their money, “I don’t know and I don’t care,” he says, and continues: “I have shut down the department of industrial policy. I am shutting down the national investment agency. I don’t want the national innovation agency.” Oh yes, and he plans to shut down the country’s anti-monopoly agency too. “If somebody thinks his rights are being infringed he can go to the courts, not to the ministry.” He plans, as his crowning achievement, to abolish his own ministry in 2007.

Up until a few years ago, this country was run by communists.

August 4th, 2004 |

23 comments to Georgia on my mind

It’s precisely because Georgia was run by communists until a few years ago that Capitalism like this is able to establish itself. Citizens of eastern European countries know from experience what a God awful, soul destrying and corrupt system socialism was, in a way that your Guardian reading, BBC watching urban liberal has never really has. Good luck to them too.

Surely privatisation of public assets as determined by government ministers is statist, especially if the funds generated are not returned to the taxpayers who were coerced into investing in them in the first place.

Apart from the practical problems of cronyism and bureaucratic incompetence, if the assets cannot be returned to their rightful owners the most moral liberal would be be syndicalisation/mutualisation amongst the people working on them. They’re the ones who occupied it and mixed it with their labour after all, and they can flog it off themselves or turn it into a business or charity as they see fit.

Best of luck to capitalist Georgia, but whenever I hear of radical economic reforms in the 3rd world I start wringing my hands at the prospect of catastrophe preceded by a Chilean-style botched job.

PS, MHallex – Why don’t you do it yourselves? Why are the British constantly looking for someone to rescue them? They built an empire that ran 3/4 of the world, and now they need foreign help to govern their tiny island?

Every time a Tony Blair execution of another British liberty occurs in Britain, the posters on this site wonder whether there is anything the Americans can do to rescue them. Now they’re looking to the Georgians.

Encouraging that this sort of thing may be done somewhere. How long before the collapse of the EUSSR gives us the same chance? 200 years?

Pace various commentators however, it is not a justification of liberty that it is “good for the economy” (whatever that means). Liberty is good in itself, not the means for the achievement of some collective goal. That freedom allows people the opportunity to become richer is merely one of its benign consequences.

Or the new Dubai. This Georgia stuff is the second round of good news I’ve recd. in as many days – the first was the fact that Dubai is now allowing freeholding ownership of property for the first time.
Has anybody here looked into that amazing oasis? NO TAXES whatsoever (well, there are some taxes on restaurant/bar food/drink, but thats it). That little city has a GDP of $65 billion, and a growth rate of 7.5%. At this point, it even beats HK in terms of potential.

So things are improving fast in these smaller states. Lets keep our fingers crossed and hope that some of our leaders in the US and the UK figure things out. If not, time to vote with our feet.

Is anyone aware of any mutual funds that invest solely in Georgia? After reading this, I know I’m interested. If I had just a bit more capital, I might have even considered buying one of those factories he’s selling off.

The Georgian capacity for “Rule of Law” is certainly the big question. I’ve often hoped that some of the breakaway Soviet Republics would attempt to create a free-market utopia. The holdback has always seemed to be rampant crime and an inability to protect private property.

I agree one (maybe Georgia) will do it and will show great results. Good Luck, folks! Stay away from those Keynesians!

Chile is a success today, but under dictatorship it stumbled from boom to bust, experiencing (it is said) no net growth for the whole period. Santiago was the most polluted city in the world, unemployemtn hit 20% and poverty 40%, water bourne diseases and malnutrition went up, blah blah blah.

Since the civilian government came in the minumum wage and coporate taxes have almost doubled, pro union legisaltion has been brought in, the welfare state significantly expanded and capital controls introduced (though recently removed). All this and the economy grew 6.5% a year, also taking advantage of industries built up with government investment and land reform by earlier governements.

Doggedly, I’d still argue that the problems of Pinochet’s Chile were more due to statism than anarchy, the Chicago Boys’ unquestionable “market fundamentalism” largely a myth. It just doesn’t help that some libbos pretend it was a paradise when it clearly wasn’t.

Kit Taylor,
The article you linked to is interesting but very long, I have so far only read it’s absract, or summary.
All I can say so far is that the jargon reveals the author to be a neo-Marxist. I just don’t believe them.

I lived in Chile for a couple of years, I lived in other South American countries, I have friends in Chile (all hate Pinochet), I visited there later a couple of times. I know from first hand experience.
Chile’s economy is an enormous success story, an unbeleivable one. It far outpaces all other Latin America countries.

I expect Marxists to belittle it and negate it and carp about income inequality and the gap between rich and poor. They always do. The NY Times article I linked to is more correct.
The study by Sherman Souther seems more a neo-Marxist rant than an economic investigation. I will (maybe) fisk it when I will find the time.

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